Newstalk ZB's Mike Hosking looks at the effect of rising minimum wages on the cost of living
It's time Mike Hosking cast-off his post-election Gucci sackcloth and sought grief counselling. One of these days he's going to have to face up to the fact that his dear mate John is long gone, and that six months ago, a majority of New Zealanders voted for change.
Hosking, it seems, was so steamed up by this grim scenario, he rushed off to the Hampton Downs race track to cool off and instead, crashed his $140,000 Alfa Romeo race car. No doubt we'll learn it was Jacinda's fault.
As for forcing employers to pay workers a minimum wage, Hosking argues this "disrupts the markets" leading to the possibility of businesses going bust and workers being thrown on to the unemployment scrap heap. "It brings an artificiality into it that the market might not be able to bear."
This despite the Ministry of Business, Innovation and Employment (MBIE) reporting that their "minimum wage model does not suggest any discernible impact" on labour costs.
It's as though he wants to turn the clock back a century or two, to the good old days when the unregulated market jungle forced young kids up chimneys to sweep out the soot, and allowed girls in match factories to die of "phossy jaw," caused by the corrosive fumes from the phosphorus they applied to each match tip, wafting up and eating away both bone and flesh.
The reality is, governments have long been setting a minimum wage, a bottom price, as it were, for the cost of labour. In a civilised society that seems a pretty basic thing to do. As the MBIE report outlines, "the minimum wage is a well-established and accepted feature of New Zealand employment law" which has, "for the last 18 years, been incrementally increased by a rate of between 15 cents and $1."
Illustration / Peter Bromhead
And while critics highlight the one line in the MBIE report suggesting "a possible negative employment effect (disemployment) of 3000," they forget to add the officials' advice that the "current strong labour market is expected to absorb some of this impact".
Further hedging its bets, MBIE emphasises "the extent to which the minimum wage has an employment effect is heavily debated in economic literature [and] there is no clear consensus…"
I do agree that the new minimum wage of $16.50 an hour is artificial. Artificially low that is. Most observers would agree it doesn't equate to a realistic Living Wage, one that would cover the true cost of keeping the employee alive and housed.
This is underlined by the $2 billion or so a year taxpayers have to pay out in family assistance and accommodation supplements and the like, to enable low-income earners to survive on the inadequate wages Hosking's market delivers them.
As someone who pays, presumably, a larger tax bill than most of us, it's surprising he is happy to be subsidising the coffee bar owners' wage costs in this way.
While employer advocates ritually warn of the dire consequences of being forced to top up the wages of the 160,000 (the current figure) workers at the bottom of the heap, it's bemusing to see that those at the top manage to find there's money aplenty to reward themselves.
Last August, the Herald's annual pay survey of chief executives in the top 50 companies, showed an average pay rise of 3.3 per cent for the 2016 year, 12 per cent in the year to 2015 and 10 per cent in 2014.
In the 2016 year alone, the top bosses' pay rise averaged $56,000, or considerably more than the yearly pay of their employees on the minimum wage. And of course, some were richly rewarded. Although Restaurant Brands doesn't disclose executive salaries, the highest paid person at the company – generally assumed to be chief executive Russel Creedy - managed to get a 37.84 per cent pay hike of $280,000, at a time the company was battling its low-paid workers over pay.
